Tinet and USCarrier Deals Could be the Start of a Second Wave of Carrier Ethernet Exchanges

CEN Feature (Apr 19 2011)

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   When Carrier Ethernet exchanges began to emerge a couple of years ago, the host operators talked a lot about their ability to solve the technical difficulties of interconnecting Ethernet services from two different carriers. More recently, some observers have noted that addressing technical challenges is only a partial solution (http://www.carrierethernetnews.com/articles/134654/seeking-ethernet-exchange-success/).

   Before any two carriers can do business with one another, they must first agree on terms and conditions – and Carrier Ethernet exchanges don’t offer any sort of silver bullet when it comes to these business negotiations.

    

   With this in mind, I wasn’t surprised to see a number of new developments in the Carrier Ethernet exchange business in recent weeks that reflect these market realities.

    

   Tinet

    

   One recent announcement came from Tinet, which is now the international arm of Carrier Ethernet exchange operator, Neutral Tandem. When Neutral Tandem announced plans to acquire wholesale Ethernet operator Tinet last year (http://www.carrierethernetnews.com/articles/109514/neutral-tandems-tinet-acquisition-could-boost-ethe/), it said it might convert all of Tinet’s 100 or so Ethernet points of presence around the world into Carrier Ethernet exchanges.

    

   The companies already have essentially made that conversion – although they’re not calling the POPs Carrier Ethernet exchanges. Instead, they’re using the brand name “EtherCloud” to describe the services that the POPs can support.  

    

   “We have 120 POPs that are interconnected,” said Tinet Chief Marketing Officer Paolo Gambini. “Any one of these is ready to support an NNI to another network. From a technology point of view, these are not islands of exchange points looking at cross-connecting partners.” Rather, he said the company’s infrastructure is “meant to glue together other networks.”

    

   According to Gambini, by using the Tinet platform, carriers can interconnect at Layer 2 without having to backhaul traffic from a handful of gateway locations as they would have to do with traditional Ethernet exchanges. “It means in terms of service capabilities, we can deliver Layer 2 VPNs using VPLS and our members can deliver them to their enterprise customers.”

    

   Tinet’s business model eliminates the need for providers of Ethernet services to establish business agreements with each other. Instead, Tinet has a master service agreement enabling it to sell connectivity on other carriers’ networks – and in most cases, the carrier purchasing services will pay Tinet, which will in turn, pay the other carrier.

    

   Tinet already has NNI agreements with 40 carriers around the world, including some in relatively remote regions where few carriers already have established business relationships with local service providers.

    

   USCarrier

    

   The other development on the Carrier Ethernet front involves USCarrier, a wholesale network operator based in the southeastern U.S. USCarrier last week announced a plan that in some ways is similar to what Tinet is doing, only on an even more granular scale.

    

   Like Tinet, USCarrier also will be interconnecting numerous Ethernet POPs in its territory. Several of these POPs are in data centers where USCarrier will be able to interconnect with Neutral Tandem or Telx, facilitating customers of either exchange operator to reach a wide range of locations in USCarrier’s serving area, thereby enabling participants on either exchange to reach those locations.

    

   Also like Tinet, USCarrier already has NNIs with numerous carriers in its territory. The company plans to leverage those agreements, and act as a one-stop shop for service providers to obtain connectivity within its territory, eliminating the need for service providers to negotiate their own business deals.

    

   It seems as though we should expect to see more companies like Tinet and USCarrier getting into the Carrier Ethernet exchange business by essentially hanging off existing exchanges and providing deeper network connectivity for the exchange operators while minimizing business agreement hassles for exchange participants. If the first wave of the Ethernet exchange business involved data center operators establishing exchanges, perhaps the second wave will involve wholesale network operators like Tinet and USCarrier grafting onto those exchanges.

    

   These new players also should enhance the value of what the traditional Ethernet exchange operators can bring to their customers, particularly if the wholesale operators have NNIs with local carriers outside major metro markets or international hubs. Clearly, a key asset for wholesale carriers will be their established relationships with local network operators.

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